Today, we’re left to ask: Is that all there is?
This week, Trump proclaimed two “historic” trade victories. On Wednesday, he signed a so-called phase one deal with China. On Thursday, the Senate passed the revised U.S.-Mexico-Canada Agreement (USMCA). Unlike past trade deals, these plans largely raise, rather than remove, barriers to trade. And whatever meager benefits they offer hardly look worth the pain we endured getting here.
Take the USCMA.
It’s about 90 percent identical to the North American Free Trade Agreement it replaces, which Trump once dissed as “the worst trade deal ever made.” The remainder largely cribs language from the Trans-Pacific Partnership, an Obama-era deal Trump tore up because it was a “disaster” and a “rape of our country.”
The USMCA also included some other minor, mostly protectionist changes, whose significance has been inflated by Trump and House Democrats alike. In fact, the agreement’s protectionist new auto provisions will raise prices and therefore hurt U.S. auto industry production, according to the government’s own analysis.
What about that China deal?
Once upon a time, the GOP was supposedly anti-tax and pro-market. Despite effusive praise from Republicans, this agreement is neither.
For one, despite some modest rollbacks, the deal actually leaves in place U.S. tariffs (a.k.a. taxes) on $360 billion worth of Chinese goods. Regardless of whatever nonsense Trump claims, his import taxes are being paid almost entirely by Americans. That is the conclusion of at least four separate studies, conducted by respected academic and government trade experts.
These tariffs raise the cost of doing business for U.S. companies and put American jobs at risk. That’s because the Trump administration has primarily taxed the inputs that U.S. manufacturers need to make their own goods. Not surprisingly, manufacturing has been in recession for the past five months.
Trump’s tariffs have also, of course, led many trading partners to retaliate, disproportionately targeting one of the president’s key constituencies: American farmers. Despite the pain he’s caused them, and a 24 percent spike in farmer bankruptcies last year, Trump has somehow still cast himself as the farmers’ savior.
First, he gave farmers Soviet-style bailouts more than double the size of the 2009 auto bailout. Now, as part of Wednesday’s deal, he has gotten China to commit to major purchases of American agricultural products.
If the commitments actually happen, they’d signify a strange turn of events. For years, a core U.S. objective was to get the Chinese economy to become more market-oriented and less centrally planned. Now, Trump has demanded that China commit to huge new centrally planned purchases of soybeans, pork and other American goods, regardless of what market demand requires.
But in any case, it’s not clear China sees these state-directed purchases as binding, despite what Trump (and the text of the agreement) says.
Chinese leadership and state-run media have suggested they won’t make the purchases if “market conditions” dictate otherwise, or if they decide U.S. product quality isn’t up to snuff. They’re not about to commit to a $40 billion purchase of something and “find out it’s literally a pig in a poke,” as Syracuse University economics professor Mary E. Lovely put it.
U.S. soybean prices fell on this news, reflecting skepticism that China will follow through. Trump did not appear to notice.
“These commitments from China are more of a ‘Yes, dear’ reaction to the U.S.,” said Benn Steil, director of international economics at the Council on Foreign Relations.
The deal is flimsy in other ways, too. On sensitive issues such as currency manipulation, it merely reiterates commitments China had already made. It completely ignores one of the main issues that led to the trade war, which Trump has left for his still-hypothetical “phase two” deal: China’s industrial policy.
To be fair, the provisions on financial market access and forced technology transfer do look promising. But the agreement’s bizarre new enforcement mechanisms do not seem likely, at first blush, to be effective in making sure they stick. If we accuse China of cheating (or vice versa), there’s no neutral adjudicator in the dispute; either side can just pull out unilaterally.
Which, again, looks an awful lot like what we’d have without this deal.
The best thing you can say about either of these agreements is that at least, for the time being, they mean Trump is unlikely to make the trade wars worse. But if that’s really all there is, it’s not much.